Avoiding Reverse Mortgage Scams
One of the biggest misconceptions about today’s reverse mortgage products is that they take advantage of senior citizens. HECMs, which are FHA-insured loans, have stringent regulations and protections in place that make them safer for the consumer. The fact is, according to the Consumer Financial Protection Bureau’s Office of Older Americans, less than one percent of Suspicious Activity Reports (SARs) involve reverse mortgages. SAR is a document that financial institutions file with the Financial Crimes Enforcement Network (FinCEN) if there is a suspected incident of money laundering or fraud.
Each year, an estimated five million, or one in ten, older Americans are victims of elder abuse, neglect, or exploitation, and costs older Americans more than $2.6 billion dollars a year. Elder financial abuse is the illegal or unauthorized use or control of a senior’s funds or resources for someone’s own gain.
Here are signs that could indicate elder financial abuse:
- Unpaid bills, eviction notices, or notices to discontinue utilities.
- Withdrawals from bank accounts or transfers between accounts that the older person cannot explain.
- The elder has a new “best friend”.
- Legal documents, such as powers of attorney, which the older person did not understand at the time he or she signed them.
- A caregiver expresses excessive interest in the amount of money being spent on the older person.
- Suspicious signatures on checks or other documents.
- Implausible explanations given about the elderly person’s finances by the elder or the caregiver.
- The elder is unaware of, or does not understand, financial arrangements that have been made for him or her.
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If you are in the market for a reverse mortgage, here are some tips to keep in mind.
Federally insured reverse mortgage loans can offer seniors much needed financial security. The proceeds can be used to consolidate their debt, pay for day-to-day living expenses and necessary home repairs or remodeling projects so that seniors can afford to continue to live in their own homes.
- Avoid high-pressure sales. Taking out a reverse mortgage is an important decision and requires time and consideration. If a reverse mortgage lender makes you feel rushed or uncomfortable, find another lender.
- Be cautious of misleading, confusing, or incomplete advertisements that try to convince you to get a reverse mortgage without fully understanding the implications.
- Potential borrowers can protect themselves from unscrupulous lending practices by working with a Certified Reverse Mortgage Professional (CRMP). A CRMP is a lender who specializes in reverse mortgages and who can update you on the new guidelines, safer consumer practices, and how the programs of today can work for you.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.